After being directed by the U.S. Supreme Court to reconsider its decision in light of the Court’s Stolt- Nielsen decision, the U.S. Court of Appeals for the Second Circuit reached the same result on the second go-around in In re American Express Merchants’ Litigation, ruling that a class action waiver provision in the arbitration clause of a card acceptance agreement was unenforceable. The Second Circuit ruled that it would be prohibitively expensive for the plaintiffs to bring their federal antitrust claims on an individual basis, and therefore it refused to enforce the class action waiver provision because it would have deprived the plaintiffs of substantive rights under the antitrust statutes. However, the Court of Appeals emphasized that it was not holding that class action waivers in arbitration agreements are per se unenforceable, and that each case must be considered on its own merits, governed by a “healthy regard” for the liberal federal policy favoring arbitration. Moreover, despite its ruling that the class action waiver was unenforceable, the Second Circuit noted that the Stolt-Nielsen decision precluded it from granting relief ordering class-wide arbitration.
The U.S. Supreme Court continues to exhibit interest in cases presenting arbitration issues, and recently it granted certiorari to review two arbitration matters next term. One of the matters, concerning whether a party resisting arbitration must show prejudice in order to establish a waiver by the other party of the right to arbitrate, has been dismissed by stipulation of the parties. In the other matter, the Court is postured to review Greenwood v. Compucredit Corp., in which the Ninth Circuit Court of Appeals invalidated an arbitration agreement based upon its holding that the federal Credit Repair Organization Act specifically prohibits agreements that disallow a consumer’s right to sue in court for violations of the Act.